Junior nitrogen producer Midwest Fertilizer Co. LLC told Green Markets last week that it remains committed to its Posey County, Ind., nitrogen project (GM Sept. 8, 2017) despite a proposed determination by the U.S. IRS that $1.26 billion in bonds for the project are not tax-exempt Midwestern Disaster Area Bonds, and therefore the interest paid to the holders is not excludable from gross income. The IRS decision was disclosed on Jan. 5.
“Midwest Fertilizer is very disappointed in the IRS decision to issue a proposed adverse notice with respect to the municipal bonds issued to finance the $2.8 billion fertilizer manufacturing complex in Posey County, Ind.,” the company said in a statement to Green Markets. “Midwest Fertilizer remains fully committed to completion of the project, and it is currently reviewing its options for addressing the issues raised by the IRS, including an appeal. Midwest Fertilizer is grateful to the State of Indiana and the Posey County Commissioners for their continued support for the project. The company and its counsel remain confident that there should be no change to the tax-exempt status of the bonds, and we look forward to working with the IRS to resolve the matter.”
Midwest Fertilizer had no comment as to whether this development would impact its timeline. Back in September (GM Sept. 8, 2017), the company told Green Markets it was eyeing second-quarter 2018 for the firming up of the financing and construction considerations, with groundbreaking expected in 2018. In September, the company said it believed the plant would be up and running by the end of 2021, with operations expected to begin in 2022.
The complex is expected to produce 2 million mt/y of ammonia, UAN, and diesel exhaust fluid (DEF). The company updated its permits in early 2017 (GM Feb. 3, 2017), which at that time included plans for a 1,320 mt/d urea granulation plant, a 2,640 mt/d urea synthesis plant, a 5,160 mt/d UAN plant, a 2,400 mt/d ammonia plant, a 1,840 mt/d nitric acid plant, three UAN tanks up to 40,000 mt, two ammonia tanks up to 30,000 mt, one nitric acid tank up to 8,000 mt, one DEF tank up to 7,000 mt, and one OASE solution/methyl dietharolamine (MDEA) tank at 395,000 gallons.
The facility would be located on 220 acres in Posey County – where Mount Vernon is the county seat – to serve farmers throughout Indiana and the Midwest.
The project, planned since 2012, has encountered other obstacles and delays. In 2013, then-Gov. Mike Pence suspended state support for the project, citing concerns with Pakistan’s Fatima Group, the company’s lead investor (GM May 20, 2013). Pence later said he would not prevent Posey County from pursuing the project (GM June 24, 2013) and reopened talks with Midwest Fertilizer.
Iowa Fertilizer Co. (IFCO), which is owned by OCI NV, Amsterdam, also used some $1.26 billion in Midwest Disaster Area Bonds. IFCO’s Wever, Iowa, nitrogen complex was completed last year. There has been no word on whether the IRS is also reviewing those bonds. OCI did not respond to inquiries last week. The cases may be different, in that intermediaries were involved with the Midwest Fertilizer bonds– Posey County and the Indiana Finance Authority.